What Is Surrender Value in Insurance?
At some point you may decide that you no longer want or need a life insurance policy. If your policy is a permanent plan, which is the type that you would normally keep throughout your lifetime and accumulates cash, you may be able to surrender or cash in the policy, which will terminate coverage.
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Identification
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A life insurance policy is the amount of money you would receive if you decide to cash in your life insurance policy. Only a permanent life insurance policy such as whole life can have a surrender value, as term policies do not accrue cash.
Calculation
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To calculate your policy's surrender value, your life insurance company will subtract any applicable surrender fees from the accumulated cash value. In addition, if you had taken money from the accumulated cash value in the form of a policy loan, the company will deduct the amount of any outstanding loan balance plus interest.
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Considerations
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There may be tax implications when you surrender your policy. In general, any amount you receive that is greater than the amount you've paid in premiums will be considered taxable income.
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References
- Photo Credit cash on hand image by Photoeyes from Fotolia.com
